Gold breaks records above $3,830, up 10% in September

Gold blew past $3,830 an ounce today, its highest price ever, and it’s already up over 10% in September alone. The spike came as China ramped up its ambition to be the new home for sovereign gold reserves, moving deeper into the global bullion market.

Beijing has spent months trying to convince friendly central banks to store new gold purchases inside China. At least one country in Southeast Asia is already said to be interested.

The effort is being coordinated by the People’s Bank of China (PBOC) through the Shanghai Gold Exchange (SGE). The SGE’s International Board, which the central bank launched in 2014, is being positioned to hold the bullion in custodian warehouses.

The gold would be newly acquired, not shifted from old reserves, and would count toward the countries’ official holdings while staying inside Chinese territory. The PBOC wants to give these nations a physical alternative to Western vaults, one that’s not dependent on the U.S., U.K., or Switzerland.

China expands gold play while the West tries to hold ground

The plan plays right into Beijing’s larger push to weaken the global grip of the dollar and push the yuan as an international currency. As more countries load up on gold to hedge against geopolitical shocks, China is offering to physically hold that gold. That’s not a small deal. Custody of national assets builds trust, influence, and leverage. But China isn’t the global gold landlord just yet.

The Bank of England still leads in volume, sitting on over 5,000 tons of reserves — nearly $600 billion worth. London remains the most active global marketplace. China, by comparison, is still ranked fifth in central bank holdings, based on numbers from the World Gold Council. Still, it leads the world in domestic demand, whether through jewelry or investment bars.

Beijing is also making it easier to buy, sell, and hold gold. The SGE this year opened its first offshore vault and contracts in Hong Kong, meant to boost yuan-denominated trading. And the PBOC recently loosened import restrictions, another move to keep bullion flowing into the country. Meanwhile, prices have nearly doubled in two years, passing even the inflation-adjusted peak from 1980. Goldman Sachs says the rally could continue to $5,000 if even 1% of private Treasury holders switch into gold.

Past cycles explain current fears driving up gold

The push higher isn’t just in dollars. Gold is hitting new highs in sterling at around £2,800, and even rising sharply in the Swiss franc, which is widely considered one of the hardest currencies. Nour Al Ali, strategist at Bloomberg Markets Live, pointed out that gold is up 25% in Swiss francs, 33% in sterling, and a massive 44% in U.S. dollars year-to-date.

There’s an old saying, joked about by Dominic Frisby at last month’s Merryn Talks Money panel in Edinburgh: “Keep 5% of your portfolio in gold and hope it doesn’t go up.” But gold has done nothing but rise, and that’s not just market noise. It’s about fear — not just of inflation, but of what happens when nations stop trusting each other’s currencies.

We’ve seen this before. After peaking in 1980, gold lost value for nearly two decades, bottoming in 1999. But when China’s economy exploded and Western debt piled up in the 2000s, gold came back. It soared again after the 2008 crash, until 2011, when it began a painful fall that lasted till 2016.

From there, two major things brought gold back to life. First, Donald Trump’s 2016 election and Brexit both pushed up global risk. Second, 2015 marked the end of deflation in the U.S. and U.K., with inflation sticking around afterward. Then came Covid, and gold started moving again — swinging violently but never crashing. The real takeoff didn’t come till early 2024.

Right now, the main engine behind the gold rally is mistrust in the financial system. After watching the U.S. weaponize its currency power, non-Western central banks started buying gold as a way to escape the dollar’s grip. Unlike fiat currencies, gold is a bearer asset. It can’t be frozen. It doesn’t rely on trust. It just is. And that matters in a world where cooperation between governments is breaking down fast.

Could it reverse? Only if governments start getting serious about fiscal responsibility, which isn’t happening. Gold will keep its safe-haven status as long as nations keep spending without limits. Unless a new global reserve asset shows up, gold remains the backup.

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